This fall’s energy relief payment, which would go out along with the annual Permanent Fund dividend, is looking smaller than expected several months ago.
The “bonus” on the 2024 dividend would come from state revenues in excess of what is needed to cover the spending plan approved by lawmakers and the governor last spring. The Legislature included a provision in the state budget that said half of any surplus would go into savings and half into an energy relief payment to Alaskans.
The latest projection for the fall payment is about $175, Alexei Painter, director of the Legislative Finance Division, said Jan. 3. It could be as much as $500 per person if state revenues come in stronger, but that is not looking likely.
Alaska North Slope oil prices, which were in the high $80s and $90s per barrel for most of August, September and October, have dropped down into the high $70s as U.S. oil production is at a record high and global markets are concerned about supply outpacing demand.
In addition, North Slope oil production for the fiscal year that started July 1, 2023, is now anticipated to average 470,000 barrels a day, according to the Alaska Department of Revenue’s December forecast, down from the 496,000 barrels predicted by the department last March.
Revenues from oil taxes and royalties, which are directly tied to price and production, are second to Permanent Fund investment earnings in filling the state general fund.
The budget set a cap on the fall 2024 energy relief payment at $500 per person, which looked achievable last summer when oil prices and production were higher. Legislators called the bonus an energy relief payment to express their intent to help Alaskans pay the additional costs of high gasoline and heating fuel prices.
The Legislature issued a similar energy relief payment in 2022, at $662, when state revenues were boosted by record high oil prices after Russia’s invasion of Ukraine stressed markets and drove crude over $120 a barrel.
Separate from oil prices, state revenues this fiscal year are expected to come in lower than forecast earlier in 2023 because ConocoPhillips has decided to go ahead with its $8 billion Willow oil project on the North Slope. Willow could start producing in 2029 and peak a few years later at as much as 180,000 barrels a day, according to the company.
Though such a large investment in new oil production is good for the state treasury in the long term, ConocoPhillips will be able to deduct an estimated $700 million in development expenses on its taxes this fiscal year, reducing state revenues and cutting into any surplus that might be available for the bonus payment to Alaskans, explained Painter.
Legislators last spring decided it would be more responsible to wait until the fiscal year ends on June 30 to determine how much state revenues might exceed budget needs, and then, if there is a surplus, send out an extra payment this fall as part of the dividend distribution.
The Legislature and governor have the legal ability to change the energy relief payment when they go back to work this month. The session starts Jan. 16 and is scheduled to run through mid-May.
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